Corporate Office Properties Trust (COPT) CEO Randall M. Griffin

Randall M. Griffin has a secret.

Several of them, actually. But there’s one secret in particular Griffin holds to his chest with a vice-like grip.

It’s about 10 years old and arguably set in motion a series of events that propelled a fledgling real estate investment trust with business in the Baltimore area into a thriving landlord with nearly 20 million square feet of property nationwide under its watch.
The key to this locked box is the identity of the tenant that in 2000 leased part of a 12-story tower at COPT’s then-largely vacant National Business Park in Anne Arundel County. The rumor mill churned out one possibility — the code-cracking National Security Agency.

Griffin, to this day, offers another: “The U.S. government. That’s all I can tell you.”
Today, National Business Park is a 500-acre office complex near Fort George G. Meade in Anne Arundel County, a miniature city that became the model for COPT’s other office parks in Virginia, Colorado and, most recently, Harford County.

More than a personality quirk, Griffin’s penchant for the clandestine is deliberate and highly profitable for Columbia-based COPT. As CEO of the publicly traded company, Griffin’s ability to shroud his firm’s business in secrecy has made COPT one of the nation’s largest landlords to the Pentagon, NSA and their legion of Fortune 500 defense contractors.
And as the U.S. Department of Defense ramps up to battle the next great threat to national security — cyber terrorism — COPT’s business parks have become the staging areas.

Griffin, 65, conducts much of his business quietly because he has to; it pays the bills. He regularly meets in private with U.S. senators and congressmen, and even has the ear of NSA Director Keith Alexander and other top Pentagon officials.

Meanwhile, confidentiality agreements prohibit him from disclosing even the names of COPT’s highly classified tenants who occupy the firm’s buildings, which are equipped with high-tech security and designed to block listening devices.

“I think it’s been more indicative of the kind of global society we live in,” Griffin said. “We live in a dangerous world.”

If Griffin were loose-lipped about the occupants of his properties, they wouldn’t be tenants at all. Instead, Griffin and COPT have earned the trust and business of such government contractors as Booz Allen Hamilton Inc., Computer Sciences Corp., Boeing, Northrop Grumman Corp. and others.

As a result, the company’s stock has grown fivefold this decade, trading for $37.54 a share as recently as Dec. 22, and it made $42.4 million in funds from operations during the third quarter. With projects in the works near Fort Meade and Aberdeen Proving Ground in Harford County, COPT also is poised to reap the benefits of the military’s Base Realignment and Closure plan, which will send thousands of military personnel and defense contractors looking for office space near those growing bases.

But it was Griffin’s most overt move in 2009 that raised eyebrows around Greater Baltimore. With foreclosure of Edwin F. Hale Sr.’s 17-story First Mariner Tower in Canton looming in late October, COPT parlayed a loan for the building’s construction into a $125 million acquisition of Canton Crossing — one of Baltimore’s prized redevelopment projects.
Not only did the white-knight deal show COPT’s willingness to deviate from its defense sector-laden, suburban-oriented portfolio, it also provided another glimpse of Griffin’s business acumen and gamesmanship. A few weeks prior, Griffin and COPT nearly scored another last-minute victory by wrestling away development rights to a 400-acre plot near APG from Baltimore developer St. John Properties Inc.

At a time when many in the commercial real estate industry are licking wounds inflicted by an unforgiving recession, Rand Griffin-led COPT is still raising, spending and making money. That’s why the Baltimore Business Journal picked him as its 2009 Newsmaker of the Year.

Ed Hale’s First Mariner Tower might have sold at a foreclosure auction Oct. 21. More than three years after borrowing $84 million from Ixis Real Estate Capital, Hale defaulted on the loan after paying less than $10 million on the debt, according to Securities and Exchange Commission documents.

The day before the auction, COPT signed a deal with Ixis’ successor, Natixis Real Estate Capital Inc. of New York, to take over the $84 million loan. And less than a week later, COPT bought Hale out of all but a slice of Canton Crossing.

For Griffin, the deal was neither impetuous nor ill-fitting; it went according to plans he put in place more than a year earlier. In August 2008, Griffin loaned Hale $15 million to help him pay down some of his debt. Griffin anticipated the mezzanine loan wouldn’t be enough, that Hale would need to part with the property, and that COPT would come to own it.
COPT got it cheap. For property valued at about $1 billion, COPT paid $125 million — including its initial loan.

“It’s a beautiful building. I think we got an excellent acquisition price for it,” Griffin said. “But primarily, it put us in the right position, with the right leverage in that position, to take advantage of it.”

COPT didn’t get to that position by accident. Not only did Griffin see what was coming for Hale, he also saw what was barreling down on the residential and commercial real estate industries in 2007.

Griffin, a Harvard Business School graduate, is regarded as a visionary — someone who is able to see around corners, spot trends and pounce on opportunities.

Griffin has been through six real estate recessions since he began working in the industry in 1973 as a homebuilder with Levinson Homes in St. Louis. As a first lieutenant in the U.S. Army in the late-1960s, he helped train 660 Vietnamese to battle the Vietcong. And while working with EuroDisney in the early 1990s, Griffin oversaw all development not related to its theme parks, coordinating the movement of people who spoke different languages. His senses are keen.

During the height of the real estate market in 2007, Griffin watched closely as developers paid princely sums for overvalued real estate, often with the same types of risky financing deals that would later trigger a nationwide wave of foreclosures.

After returning from an Urban Land Institute conference in Philadelphia in April 2007, Griffin, who became COPT’s chief executive in 2005, said to his staff: “We’ve got to really hunker down. This is going to be a severe recession.”

During the past year, throughout the Great Recession, COPT has leased more than 1.9 million square feet of space. Its 19.4-million-square-foot portfolio of office properties is about 90 percent leased. And the company is engaged in about $250 million worth of construction.

To put his company on this sturdy financial ground, Griffin orchestrated a series of financial two-steps. He helped negotiate a construction loan agreement with a group of lenders for up to $325 million, then borrowed another $221.4 million under a mortgage loan that matures in 2012 — the year Griffin forecasts recovery for his industry. COPT also issued 3.7 million shares of stock on Sept. 23, 2008, about a week before the market nearly collapsed. The offering still raised another $139 million.

“He is a very astute businessman, and nobody would accuse him of not being that,” said Richard W. Story, CEO of the Howard County Economic Development Authority.
Griffin and COPT also have benefited from some extraordinary circumstances — none more obvious than the terrorist attacks of Sept. 11. Griffin and his team may have foreseen a growth in defense spending when they targeted the dairy farms between Baltimore and Washington, D.C., for development. But they never imagined — who could have? — the growth that would engulf the defense contracting industry in the months and years after Sept. 11.

The first three buildings of National Business Park, a project 15 years in the making, sat vacant until that “U.S. government” lease earlier this decade attracted such corporate titans as Northrop Grumman, Lockheed Martin Corp. and IBM Corp. to the office complex.
“Nobody could have predicted what happened on Sept. 11,” said John Blumer, the former head of KLNB in Baltimore. “The National Business Park just happened to be in the right place at the right time.”

Again, Griffin found himself in prime position when the federal government announced in May 2005 that military bases in New Jersey and Northern Virginia would consolidate operations with those at Fort Meade and Aberdeen Proving Ground. The base realignment and closure, known as BRAC, is slated to bring as many as 60,000 new government and defense contracting jobs to Maryland — most of them to Fort Meade and APG.

Soon after BRAC was announced, Griffin sent COPT officials on the hunt for land as close as possible to APG. In September 2007, COPT paid $10 million for a 56-acre swath of land next to the base, where the developer is building an 800,000-square-foot business park for defense contractors. COPT already has signed Mitre Corp. to space in one building under construction, is building a second building on spec — meaning without a signed tenant — and could break ground on a third early next year.

Every so often, U.S. Sen. Barbara Mikulski, a member of the Senate Select Committee on Intelligence who helped Maryland reap BRAC’s benefits, seeks an update from Griffin on his development projects in Aberdeen and at Fort Meade. The latest meeting took place Dec. 8.
“I think Randall is a very smart businessman,” she said. “He is, by all accounts, a strategic thinker.”

In 1993, after overseeing $1.5 billion in development for EuroDisney, Rand Griffin left Europe for Maryland, where he was recruited by the leaders of a floundering Baltimore real estate firm, Constellation Real Estate Group. Inc. The company was the subsidiary of Baltimore Gas & Electric Co., and it had acquired an array of properties, ranging from land and office buildings to entertainment complexes and retirement communities.

In the middle of another real estate slump, those investments were costing the utility about $24 million a year to break even. The company lacked direction, and some executives wondered if it wasn’t in the parent company’s best interest to turn out the lights.
Griffin had other ideas.

“I remember interviewing with the chairman and the key people at Baltimore Gas & Electric, and I said, ‘I’m not coming here to just wind the company down,’ ” he recalled. “I’m coming here to fix it and grow it.”

Among Griffin’s doubters was Richard Uhlig, Constellation’s former head of marketing and leasing. “He was optimistic; he said, ‘We’re going to get to profitability,’ ” Uhlig recently said of Griffin’s enthusiastic approach. “We kind of kept some of our opinions to ourselves. I give him a lot of credit for what he’s accomplished.”

Five years after joining Constellation Real Estate, after developing properties for such giants as Frito-Lay and Sachs Fifth Avenue, BGE sold the business to Philadelphia investors Clay W. Hamlin III and Jay Shidler, who were looking to bolster their newly formed REIT, Corporate Office Properties Trust. BGE’s failed deal with Potomac Electric Power Co. in December 1997 set off a reaction that led to the May 1998 sale of Constellation Real Estate to COPT for $200 million.

“It was perfect for us because we needed to build a management team and we needed to get access to bigger markets,” Hamlin said. “[Griffin] recognized he would have a huge leadership role and a huge management role.”

In that role, executive and company have prospered. Eileen Cassell knows that as well as anyone; she has been Griffin’s secretary since his first days with Constellation. And during nearly 17 years on the job, she has learned of something else her boss won’t let go — his cool.

“He may have a time where he’s like, I wish we could get that done sooner, or I wish that would’ve happened,” Cassell said. “But he doesn’t get angry. It’s just not in his makeup. It’s really a great trait in a leader.”

Friday, December 25, 2009

Baltimore Business Journal – by Daniel J. Sernovitz Staff

Our capitalism could use a good makeover

“We cannot rebuild this economy on the same pile of sand.”  Those were recent words from President Obama.

What I believe the president was saying was that the prevailing model of capitalism, which was shaped by previous administrations and which embraced a pure form of economic liberty, is simply not working.

Clearly, economic growth during the Bush presidency was slower than in any decade since before World War II. Incomes for most Americans have stalled.
We have relied far too much on financial engineering and on foreign capital to finance our domestic debt.

That is the scenario that led to Robert J. Barbera’s must-read new book, “The Cost of Capitalism: Understanding Market Mayhem and Stabilizing Our Economic Future.”
Barbera places the blame for our economic stagnation squarely on government policy based on a “misguided confidence in the infallibility of free markets.”

He writes: “It is not that we put our faith in the wrong people, but that we embraced the wrong paradigm. The events of 2008 revealed that using simple-minded free-market rhetoric as a policy guide is a recipe for disaster.”

The author, a Wall Street economist, is also an Economics Department Fellow at Johns Hopkins University.

Although Barbera thinks change is definitely necessary, he maintains his abiding faith in capitalism. He is in no way a left-wing reformer.

In fact, he wrote: “Risk takers are the main drivers in the free-market machinery. Their efforts go a long way toward explaining the lofty growth rates capitalist economies have delivered in the postwar years.

He seriously questions complex financial derivatives and the complex mathematical models on which they are based.

He wrote: “The constructs were underpinned by the assumption that people are well informed and act rationally. They failed to acknowledge that financing markets periodically go haywire.”

He also is very critical of both Alan Greenspan and Ben Bernanke. He thinks that both focused too much on upward wage and price pressures and put too much faith in “computer technology gains.”

One of his points that I totally agree with is that government policy-makers do not respond with the same urgency to rapidly rising markets that they do to rapidly falling markets. It seems to me that explains a lot about the current malaise.

The author makes another salient point: “Innovation on Wall Street, over time, dulls the applicability of a given set of regulation.”

This, he said, demands a constant vigilance and regular updating of the rules, something that has been absent in recent years.

He carefully documents the huge housing crisis, saying that “from 1966 to 2007, housing prices maintained a continuous upward trend.”

That caused economists and home-owners to assume that prices would never fall.
He continues: “As prices rose, people made even larger bets on the housing market in the form of subprime mortgages, mortgage refinancings and complex financial derivatives.”
I heartily recommend this book to anyone interested in economics and government. I certainly agreed with his basic thesis.

Now, as both the economy and the financial markets are beginning to show the first signs of improvement, it is imperative that the Obama administration, the leadership at the Fed and all Americans take a long hard look at the form of capitalism that is best today.

“The Cost of Capitalism” provides a sound blueprint for starting that process.
Friday, October 30, 2009
Kansas City Business Journal – by Michael Braude Contributing Writer

Johns Hopkins to buy former Zurich property for expansion

A joint venture between Johns Hopkins insitutions reached a deal to acquire the former Zurich Insurance Co. property in Hampden to consolidate various functions across its portfolio of Baltimore City properties.

The venture, between Johns Hopkins University and Johns Hopkins Health System, is expected to close for an undisclosed price March 31. The property at 3910 Keswick Road is assessed at $23.5 million and is less than a half-mile from the university’s Homewood campus.

The university and health system will use the two-building, 415,000-square-foot complex for their financial, data processing and administrative functions. The university is the region’s largest employer with 31,900 workers, while the health system ranks third with 18,600 people on its payroll.

“The property’s location, layout, infrastructure and amenities made it a very attractive facility for both Johns Hopkins institutions,” James T. McGill, the university’s senior vice president for finance and administration, said in a statement.

It’s the second major purchase this year for Hopkins, which paid $12.5 million in May for a Charles Village site which was to be developed into condominiums by Baltimore’s Struever Bros. Eccles & Rouse Inc. The university — on its own rather than with the health system — bought that property in the 3200 block of St. Paul Street for future development.
The Zurich property has been on the market for more than a year. As the Baltimore Business Journal first reported in November 2008, Zurich was trying to sell the property in connection with its move from Baltimore City to new space in Owings Mills. The financial services provider has since relocated its 600 employees to that new site in the Red Brook Corporate Center.

The property at Keswick Road and 40th Street is adjacent to the Rotunda shopping center and includes 1,500 parking spaces, a cafeteria, meeting and classroom space.
“The more we looked at both our future needs and what we’re paying now to operate in leased and owned space throughout the metro area, the clearer it became that buying this property made good economic sense for both entities,” Ronald Werthman, chief financial officer for the health system, said in a statement.

The facility will be filled in over time as leases expire at other Hopkins properties, which it did not disclose.

The university and health system are separate corporations but have combined space in seven centers across the region for combined efforts.
Wednesday, December 23, 2009,

Baltimore Business Journal – by Daniel J. Sernovitz Staff

Baltimore business district becomes special tax zone

Baltimore’s financial district is among four city neighborhood’s entering a state tax credits program aimed at creating jobs and sparking redevelopment.

The Maryland Department of Economic Development approved Wednesday Baltimore’s request to expand its Enterprise Zone by 329 acres. That includes approval for a 45-acre area downtown from Baltimore to Lombard streets between Paca and President streets.
The area includes the Morris Mechanic Theater and a stalled Sheraton Four Points Hotel on South Calvert Street. City officials hope the new Enterprise Zone designation will jump-start those redevelopment projects and combat rising vacancy rates.

Businesses moving to a Maryland Enterprise Zone may be eligible for credits on their real property taxes and state income taxes. Existing businesses in the areas may receive tax incentives in exchange for creating new jobs and making capital investments.
In total, Baltimore City’s Enterprise Zone will be expanded by 329 acres to 22,000 acres.
New enterprise zones include:
• Pennsylvania Avenue; Martin Luther King Boulevard to Fulton Avenue, which currently has a 30 percent vacancy rate
• South Clifton Park; Sinclair Lane from Washington to Rose streets; and,
• 3200-5200 blocks of Liberty Heights Ave., which hopes to attract a new grocer.

Communities with deeper unemployment problems and smaller median incomes are eligible to become a “focus area” under the program and receive greater incentives.
The city also received approval to renew its 937-acre Carroll Camden focus area and create a new focus area around Howard Street. The area is bounded by 28th Street, the Jones Falls Expressway, Charles Street and North Avenue.

Allegany County also received approval to renew its Route 220 South Enterprise Zone, which is 380 acres and includes the 160-acre Barton Business Park. Prince George’s County renewed its enterprise zone and focus area, which now includes areas along the International Corridor/Gateway Arts District; the Port Towns and Annapolis Road Corridor; the Cabin Branch and Central Avenue area; and the Southern area, which includes Branch Avenue and Marlboro Pike.

In 2008, businesses located in the state’s 28 Enterprise Zones received $26.3 million in property tax credits, spurring nearly $2 billion in capital investment over the past 10 years, according to DBED.

Baltimore Business Journal – by Ryan Sharrow Staff

Wednesday, December 23, 2009,

Baltimore Development Corp. seeks architects for facade upgrades

The Baltimore Development Corp. is seeking architects for as many as 40 facade improvements in five city neighborhoods where commercial vacancy rates are high.

The project is part of the BDC’s Community Development Block Grant Recovery Act Program. The $800,000 in funding comes from President Barack Obama’s $787 billion stimulus act. The goal of the initiative is to spur job growth, make neighborhoods more visually attractive, stimulate business recruitment and retention, and lower vacancy rates, the BDC said.

The five targeted neighborhoods for the facade improvements are: Belair-Edison, Oldtown, Pennsylvania Avenue, Pigtown and West Baltimore Street. All of the areas’ commercial vacancy rates exceed 20 percent, according to the BDC.

BDC is proposing no less than five commercial facade projects is each neighborhood, with an overall goal of improving 40 commercial facades.

The architects will work with the BDC to development preliminary designs. BDC is encouraging interested architects to visit previous facade upgrades at the 1500-1800 blocks of Pennsylvania Avenue to gain insight into the agency’s expectations.

The request for proposal can be found on the BDC’s Web site. The deadline for submission is Feb. 1. The architects are asked to be good in standing with the state of Maryland.

Baltimore Business Journal

by Ryan Sharrow Staff

Maryland facing $77 million drop in revenue

ANNAPOLIS — Gov. Martin O’Malley says the state is facing another $77 million drop in revenue projections.

The Board of Revenue Estimates is meeting Wednesday afternoon to give the latest projections for fiscal year 2010 and 2011.

O’Malley says the newest numbers indicate that “we really need additional help from Washington.”

O’Malley, a Democrat, says without more federal help, Maryland and many other states will be forced to add to unemployment woes, rather than helping to battle joblessness.

Maryland already is facing an estimated deficit between $1.5 billion and $2 billion for fiscal year 2011. O’Malley will submit the budget for that fiscal year in January.

Posted: 1:16 pm Wed, December 16, 2009
By Associated Press

Developer to pay $600K for west side parcels valued at twice that much

As part of the effort to revitalize downtown’s west side, Baltimore officials Wednesday approved the sale of a large redevelopment parcel north of the city’s arena for less than half its value, using money lent by the city at zero interest.

Howard Street Lofts LLC, an entity controlled by Alex Shewchuk and Sean McCarthy, principals of local firm Accent Development Co., will pay $600,000 for four adjacent properties in the 400 block of North Howard Street. They plan to build a $7.7 million mixed-use project on the site, including 7,900 square feet of retail and offices, 26 apartments and parking.

In September, the properties were valued by two independent appraisers at more than $1.2 million. And as a sweetener, the city also financed most of the developer’s purchase of the properties, allowing Shewchuck and McCarthy to purchase the site with two no-interest promissory notes worth $500,000, in addition to $100,000 of their own money.

The interest rate on the larger of the two notes adjusts to 2 percent after 10 years, while the other only takes on interest payments if the developers sell the project.

“This is the best developer that came forward with a development project,” said Kathy Robertson, who heads the WestSide Initiative for the Baltimore Development Corp., the quasi-public city agency that negotiated the deal. “It’s not unheard of. It’s not like this is the first property that has had this type of infusion of funds.”

The 400 block of North Howard is part of a much larger effort to renew a part of Baltimore that was once a vibrant retail district with department stores, antique shops and busy foot traffic. Investors have poured hundreds of millions of dollars into projects such as the Avalon Centerpoint, a Bank of America-financed apartment complex on Howard Street, and the state-sponsored revitalization of the Hippodrome Theater.

The BDC called for proposals on four separate development parcels along Howard Street last year. The Accent team won three of them. Two were merged for the Howard Street Lofts project, at 408-416 North Howard, while the other, the redevelopment of the historic Mayfair Theater at Howard and Franklin, has not yet been sold to the group.

“We’ve been thinking about the west side for a long time. It’s sort of a natural growth,” said Shewchuk. “It’s the middle of so much that is well established. … As a developer, you’re well served in going to places where you think real estate will increase in value.”

Baltimore’s light rail line runs past the site of the proposed project, and the location is close to the downtown business district, the University of Maryland’s graduate schools, and 1st Mariner Arena. Accent is also one of four finalists bidding to redevelop the arena. News on which team will be selected for that project is not expected until next year.

Accent has not had luck on the west side in the past. In 2007, the company completed a multimillion-dollar renovation of the Faust Bros. building at 307 W. Baltimore St., paid for by state-issues historic tax credits and construction loans from Montgomery County-based Eagle Bank Corp. That building sits unoccupied.

On the same block as the proposed Lofts project, developer Wendy Blair last year opened the newly-renovated St. James Place apartments, another residential redevelopment of a historic building that was funded by grants and low-interest loans from the city, along with state and federal tax credits.

Today, Blair said, 23 of the building’s 25 units are rented, for between $875 and $1,200 per month, but it’s still difficult to pay the debt service on the $6 million she put into the project.

“People are dying on the west side, because it’s so hard. Rents have not moved for four years. Construction costs have gone up. It’s hard to make the numbers work,” she said. “I sit there today wondering, ‘Why’d I even do this?’”

Shewchuk said he hopes to finance the Howard Street Lofts with a mixture of debt from Eagle Bank or other lenders, including Wachovia and Bank of America, and up to $2.3 million in historic tax credits, which have already been allocated to the project. Still, he said he remains cautious, and added that the project wouldn’t fly without the city’s help.

“Nobody really wants to buy much, because if you buy much, you have to develop it, and you have to finance it, and especially with a place like North Howard you have to convince everyone that there will be this demand there in the future that isn’t there now,” he said.

In documents describing the deal, the city said the project will “further stabilize” the area by providing street level retail, increased taxes and job creation.

“Look what we’ve got now,” said Robertson, of the BDC. “We have two very successful developers. We have a corner building [St. James Place] that is nearly 100 percent occupied. We’ve got a plan to fix up the entire 400 block. It sounds like a success story to me.”

Posted: 8:00 pm Wed, December 16, 2009
By Robbie Whelan
Daily Record Business Writer

Judge hears Wells Fargo’s motion to dismiss ‘reverse redlining’ suit

George A. Nilson

U.S. District Judge J. Frederick Motz may hope to leave the bench soon, but presiding over the latest hearing in Baltimore’s “reverse-redlining” case against banking giant Wells Fargo Monday morning, Motz made it clear that he is no lame duck.

Hearing Wells Fargo’s second motion to dismiss the first-of-its-kind case, Motz was loudly skeptical of the city’s claims and not bashful in providing his take on the city’s social problems, at one point comparing a section of West Baltimore to “bombed-out Beirut.”

The judge seemed particularly skeptical of the city’s claims that, through regression analysis, it could isolate the effect of any given foreclosed property on public expenditures and lost tax revenue.

“That’s just silly, whether an expert says it or not,” Motz said at one point. “That doesn’t make any sense.”

The suit alleges that Wells Fargo targeted Baltimore’s black neighborhoods for unfavorable home loans, and that when borrowers defaulted and were forced to vacate the properties, the city incurred tens of millions of dollars in fire, police and other public services.

Motz, who took over the case from Chief U.S. District Judge Benson E. Legg in August, did not set any timetable for ruling but more than once hinted that he might whittle the city’s lawsuit — unlike Legg, who let it proceed after conducting four in-depth hearings.

“If the case should be cut down, I’m going to cut it down,” Motz said toward the end of the hour-and-a-half proceeding.

In the hallway outside the fifth-floor courtroom, City Solicitor George A. Nilson agreed Motz “put people through their paces” but said he felt better at the end of the hearing than at the beginning and is “not concerned” about the ultimate ruling.

Benjamin B. Klubes, a member of the San Francisco-based bank’s legal team at BuckleySandler LLP, reiterated Wells Fargo’s position that it has “a strong legal argument that the city has no standing” to bring suit under the Fair Housing Act.

Going forward

Earlier in the downtown courtroom, Motz wasted no time getting to the heart of the matter, asking John P. Relman, a private attorney from Washington, D.C. representing the city, whether the properties in question would have been foreclosed-upon or vacant regardless of the allegedly predatory Wells Fargo loans.

When Relman mentioned Judge Legg, Motz cut him off.

“We’re before me now, and I’ve had a chance to review the papers, so forget Judge Legg,” Motz said.

Relman recovered, going on to distinguish the city’s suit from cases brought by the cities of Cleveland and Birmingham, Ala., which were dismissed by other federal judges this year.

Unlike those actions, Baltimore’s suit is against only one originating lender — an “outlier,” Relman said — and is supported by ex-Wells Fargo employees’ testimony and expert statistical analysis.

Per Motz’s instructions this summer, the parties have been exchanging documents as part of a limited discovery process, and Relman argued that should continue.

“The law says we’re entitled to go forward,” Relman said, referring to Supreme Court precedent, not the recent adverse district court decisions in Alabama and Ohio.

‘Blighted core’

While Motz eventually accepted some of Relman’s responses, the judge openly questioned how one lender could be held responsible for Baltimore’s well-known poverty and crime.

“What’s happening in the inner city is despicable,” Motz said, referring to the wayward street kids who come before him accused of violent crimes. Alluding to a 25th anniversary memorial service for a slain city police detective he attended in West Baltimore earlier this month, Motz said “the place was vacant all over the place. It looked like bombed-out Beirut.”

To say that the “bad conduct” of bank executives and Wall Street schemers caused his hometown’s pervasive social ills “doesn’t follow as the day does the night,” Motz said.

Andrew L. Sandler, the defendant bank’s lead lawyer who has squared off against Relman in other consumer lending cases, picked up that theme, noting Baltimore has as many as 30,000 vacant homes. (For the period of 2005-2008, the bank contends 143 of those are relevant to the city’s suit; the city claims the number is more than 200.)

“That problem exists without Wells Fargo,” Sandler said of what he called Baltimore’s “blighted urban core.”

Sandler asked Motz to consider the implications of allowing the city to proceed with its “fanciful regression analyses” and its “grandiose damages claims” at “staggering” litigation cost.

“If this is the standard, where do we stop?” he asked, warning that a large company found to have discriminately fired employees could then be sued by its host city for collateral damage like vacant houses.

Motz had pointed questions for Sandler as well, asking him why, if the city’s neighborhoods are so hopeless, the bank made the controversial loans at all.

“Your honor, I would tell you if I could,” Sandler said.

“But you can’t,” Motz said.

“Your honor, it’s one of the great imponderables,” Sandler said.

Under scrutiny

In a letter made public Friday, Motz advised President Barack Obama that he will take senior status as soon as his successor is confirmed. A source familiar with the process said Maryland Sens. Barbara Mikulski and Ben Cardin, both Democrats, last week suggested that the president name U.S. Magistrate Judge James K. Bredar to the post.

The city has come under scrutiny for pursuing a case that might not end up being as justifiable, wide-ranging or valuable as originally advertised. Asked after the hearing about the costs of bringing the suit compared to a possible jury award, Nilson said he would not have consented to bringing the case if those figures were out of balance. But there are other considerations, too, Nilson said.

“Hopefully, you get the lending community to follow the law, for example,” he said.

Maryland Daily Record

Judge hears Wells Fargo’s motion to dismiss ‘reverse redlining’ suit

by Brendan Kearney

Published: December 14th, 2009

Top court hears Angelos’ Superblock case. Attorney calls BDC’s ’04 deal ‘more than a mere sale of land’

ANNAPOLIS — Maryland’s highest court heard arguments Thursday on a case that could set major precedents for the Baltimore Development Corp. and its role in promoting economic development in the city.

The case, 120 West Fayette Street LLP v. Mayor and City Council of Baltimore, deals with the proposed Superblock redevelopment, an effort to bring a 28-story residential tower with parking and retail attached that is expected to cost more than $100 million to downtown Baltimore’s west side.

In 2004, the BDC selected the New York-based Chera, Feil and Goldman families to redevelop the project. They later added four other New York-based real estate companies, as well as Philadelphia-based consultant Civic Visions LP to their team, known as Lexington Square Partners LLC. Shortly after, the Board of Estimates, the city’s spending panel, whose five members include the mayor and City Council president, approved the sale of the land to the developer.

But an entity owned by high-powered class action litigator and Baltimore Orioles owner Peter G. Angelos, who owns an office building adjacent to the Superblock site, has challenged the way the project was awarded, saying in a brief that the BDC’s actions were “more than a ‘mere sale of land,’” and that because the effort is a city public works project, should have been competitively bid.

M. Albert Figinski, the attorney from Angelos’ firm who argued the case before the Court of Appeals, said that the BDC approved the deal entirely before handing it off to the Board of Estimates, which approves all large city expenditures and sales of property, for a ceremonial “rubber stamp.”

In January 2008, a city circuit court judge dismissed the suit, which was originally filed in February 2007, saying the Angelos entity did not have standing to bring it. This February, the Court of Appeals ruled that Angelos’ group did have standing, and the case was kicked back to the circuit court, which ruled in August that the Superblock transaction was a land sale, not a public works project.

“If the city can do this by any means they want to, then I’m afraid the [city] charter has no meaning,” Figinski told the court. “If the city can outsource its duties today to the BDC, why can’t it outsource its duties tomorrow to some folks in Pakistan?”

The city, represented by City Solicitor George F. Nilson, who votes on the Board of Estimates, and Chief of Litigation David E. Ralph, said Figinski was mischaracterizing the role of the BDC, which they described as a consultant and advisor to the city, without the power to sell land or develop property.

“Even after exhaustive discovery, [Angelos’ lawyers] have still failed to cite one single case, one single statute … that says that competitive bidding is required for the disposition of land for redevelopment,” Ralph argued. “How can it be public, if a private developer is developing his own private property?”

He cited two sections of the city’s charter and the one part of the state code that permit the city to sell land without a competitive process in the name of the mayor as long as the deal is approved by the Board of Estimates.

Figinski’s arguments, however, succeeded in piquing Chief Judge Robert M. Bell’s interest in the question of the BDC’s role in city business transactions.

“What is the nature of the BDC?” Bell asked Ralph. “Is it a board? A commission? A bureau? An agency? … How does it fit into the charter? Don’t you think that’s the threshold?”

Outside the courtroom, BDC President M.J. “Jay” Brodie emphasized that the Angelos suit could scare off the developer, and that he hoped the court would rule on the case soon. A contract between the city and Lexington Square, which Brodie said has invested $2 million to $3 million in the project, runs out at the end of the year, and at that point the developer could back out of the deal.

“Every developer wants the right to walk away if there are overarching issues,” he said.

The court did not set a timetable for a ruling.

Maryland Daily Record

by Robbie Whelan

Published: December 3rd, 2009

Baltimore’s Mayor Is Convicted

December 1, 2009

Rob Carr/Associated Press

Baltimore Mayor Sheila Dixon left the courthouse after being convicted on Tuesday on one count of embezzlement for stealing gift cards that were meant for poor residents.

// // BALTIMORE — A jury convicted Mayor Sheila Dixon on Tuesday on one count of embezzlement for stealing gift cards meant for poor residents, but it acquitted her of three other charges, including the most serious felony theft charge.

Ms. Dixon, whose conviction may force her from office, faced five theft-related charges, and the jury failed to reach a unanimous decision concerning one of them. The state prosecutor to say he was undecided on whether to refile that charge.

“The city will still continue to move forward,” Ms. Dixon said as she left the courtroom, adding that she was headed to City Hall to get back to work.

But the split verdict leaves a cloud of uncertainty looming over the administration of Ms. Dixon, who took office in January 2007 as Baltimore’s first female mayor.

She still faces a trial in March on two perjury counts stemming from an accusation that she failed to report gifts.

Under state law, Ms. Dixon is supposed to be suspended from office after sentencing. But her lawyers have said that before that they plan to file post-trial motions and possibly appeal the verdict. If those efforts fail, Ms. Dixon will probably be forced from office and the City Council president, Stephanie Rawlings-Blake, would succeed her.

The misdemeanor charge carries a minimum sentence of a year, but it is not clear if the prosecutor will seek jail time.

“It’s a sad day for Baltimore,” Robert A. Rohrbaugh, the state prosecutor, said before commending the jury for its work. .

Ms. Dixon initially faced seven charges of theft, misappropriation of fiduciary duty and misconduct in office. Prosecutors accused her of stealing around $1,500 worth of gift cards meant for needy families. The cards had been donated by developers, including Ronald H. Lipscomb, whom Ms. Dixon dated in 2003 and 2004. Ms. Dixon was accused of using the cards to buy herself items at Target, Toys “R” Us, Old Navy and Best Buy — including, according to court documents, a PlayStation 2, a digital camcorder, DVDs and CDs.

The defense portrayed Ms. Dixon as an honest and hard-working woman of faith who made a simple mistake in using gift cards she believed had been given to her as anonymous personal gifts.

Throughout the trial, public reaction has tended toward two extremes. On the one hand, Baltimore residents voiced a sense of outrage that the mayor would steal from children and the needy. On the other hand, some residents expressed frustration that the prosecutor’s office was wasting time and money on minor offenses.

Some residents viewed the trial as politically or racially motivated. Ms. Dixon, who is black and was born and raised in West Baltimore, is a Democrat who leads a majority-black, deeply Democratic city. Mr. Rohrbaugh is a white Republican.

On the trial’s second day, prosecutors rested their case without calling their key witness, Mr. Lipscomb, to the stand. As a result, Judge Dennis M. Sweeney of Circuit Court ruled that there was not enough evidence to proceed with two of the theft-related charges.

As theater, the case was a letdown. By failing to call the mayor’s former boyfriend to the stand, prosecutors deprived the news media and the courtroom audience of the spectacle of ex-lovers turning on each other.

Still, the trial had its moments. Arnold M. Weiner, a defense lawyer, drew applause during closing arguments as he mocked the state’s case as a thin web of reckless fabrications and little more than a “sound and light show.”

The case painted an unflattering picture of how gifts and charity are handled by city leaders.

It was not contested, for example, that Ms. Dixon called a developer and asked him to donate gift cards for her to give to city children — cards that the mayor later used for her personal benefit. It was also not contested that Ms. Dixon gave one of the donated cards to Mary Pat Fannon, a lobbyist for the city whose household income tops $500,000 or that another city official took a donated card meant for needy families and used it to buy himself a Nintendo Wii.

“True, this trial hasn’t been Sheila Dixon’s finest hour, but neither did it reveal rampant venality,” said Andrew D. Levy, a law professor at the University of Maryland. “Mostly, it displayed a tone deafness to ethical issues — such as the cozy relationship between developers and local politicians — that most people have become pretty inured to.”

At times, Judge Sweeney seemed unconvinced by Ms. Dixon’s lawyers, who argued that she accidentally spent the gift cards given to her because she believed they were all meant as personal gifts.

“Your theory is, gift cards are just flowing in,” Judge Sweeney said in declining to grant a defense motion to throw out the entire case. “There are so many flowing in? They are just swimming in gift cards?

“There are not enough poor children to give them to?” Judge Sweeney later said.

Shelly S. Glenn, the senior assistant state prosecutor, tried to reinforce this skepticism among jurors. Pointing at Ms. Dixon across the courtroom during closing arguments, Ms. Glenn said, “This woman did not get this far in life if she could be so easily confused.”

By IAN URBINA

New York Times